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Global shares jump despite further massive falls in China Global shares jump despite further massive falls in China
(about 2 hours later)
US and European shares have surged in Tuesday trading, despite another night of steep falls for China's market.US and European shares have surged in Tuesday trading, despite another night of steep falls for China's market.
On Wall Street, the Dow Jones opened more than 1.7% higher, while the FTSE 100 was up almost 3% and Germany's Dax and Paris Cac were both up nearly 5%. On Wall Street, the Dow Jones was 2.5% higher, while the FTSE 100 closed up 3% and Germany's Dax and Paris Cac were both up more than 4%.
The gains came after Chinese stocks continued their run of big losses. European markets had opened higher but were were further boosted after China's central bank announced it was cutting interest rates.
The main Shanghai Composite index closed down 7.6% at 2,964.97 points. Japan also saw more sharp falls and Tokyo's Nikkei index was 4% lower. That followed two days of turmoil on China's stock markets.
On other European markets, including Lisbon, Madrid and Milan, were all also strongly higher. On Tuesday the main Shanghai Composite index closed down 7.6% at 2,964.97 points, on top of Monday's losses.
Stock markets in Lisbon, Madrid and Milan, were all also strongly higher.
Follow our live coverage of global markets.Follow our live coverage of global markets.
The global sell-off has been driven by fears that China's slowing growth means less business for everyone else. "Today's move to cut interest rates... is certainly a step in the right direction," said Anna Stupnytska, global economist at Fidelity Worldwide Investment.
China's booming economy of the last 30 years has seen the country suck in supplies of raw materials for manufacturing and, increasingly, manufactured and luxury goods from other countries. "But while this might help sentiment, it is not enough to reverse the ongoing slowdown in China's growth. Some stabilisation in activity is probably the best case scenario. A sharp rebound is unlikely," she added.
After decades of rapid growth, China is running out of steam. Investors globally are worried that firms and countries that rely on high demand from China - the world's second-largest economy and the second-largest importer of both goods and commercial services - will be affected. The volatile moves in the markets has raised speculation that the Bank of England may delay an interest rate rise.
But although the slowdown in the Chinese economy will have a bearing on Chinese firms' profitability, many view the stock market as grossly inflated. However, Paul Hollingsworth, UK economist at Capital Economics, said: "Although the UK has clearly been caught up in the recent meltdown in global financial markets, we doubt that it will knock the economic recovery off course.
The main Shanghai index more than doubled in the 12 months up to mid-June. "That said, it provides the more cautious members of the [monetary policy committee] with another reason to hold fire on voting to raise interest rates."